Commodity Trading Exchanges

More on Commodity Trading

With India becoming the fastest growing economy in the world, the demand for commodities has increased considerably. And with these high number of commodities being traded on a daily basis, commodity trading has become a financial sport many people are investing in. And that is why Commodity Trading Exchanges are being talked about!

Let’s talk about them at length here!

So today we would discuss the 4 commodity trading exchanges in India. This will help a beginner commodity trader to set the foundation of his trades. This might also give new information to an experienced commodity trader as well.

Commodity Trading Exchanges Basics

Basically, any physical thing that we use in our daily life is a commodity. This could mean our clothes, food, jewellery, metals, coal, and even energy resources.

Since the supply and demand of these commodity fluctuates, their prices fluctuate as well. Commodity trading is a way of making profits through these fluctuations, without actually using or buying the actual commodity. It deals in the trading of dematerialized commodities.

Trading of commodities isn’t a new concept. It has been around for centuries in India. However, the process has taken a new form with online exchanges due to which people can freely trade while sitting at home.

There are basically four types of commodities:

  • Metals: Copper, Silver, Gold, and Platinum
  • Agriculture: Agricultural products like wheat, soy, cotton, rice, etc.
  • Energy: Crude oil, natural gas, heating oil, etc.
  • Livestock and Meat Products: Cattle, meat, egg, pork, etc.

For more information, read this review on Top Commodities


Commodity Trading Exchanges Importance

Commodity trading exchanges are vital if one wishes to deal with commodities. The importance of these exchanges cannot be understated.

In earlier times, if people wished to sell a commodity, they had to take their actual product to the market to get it sold. Similarly, the buyer had to visit the market to purchase the commodity. Since they aimed to make a profit due to price fluctuations, they had to visit the market again and again.

Further, in physical selling, the potential customers were very limited. People could only sell it to someone who was present there to buy it physically.

However, online commodity trading exchanges have taken commodity trading to the next level. These exchanges provide a single platform where the buyers and sellers can trade freely while enjoying the luxury of their own homes or offices.

Further, with the help of online commodity trading exchanges, anyone with a computer (or even a smartphone) and a network connection can make trades. This means that a commodity is available to everyone everywhere who wishes to trade in it.


4 Commodity Trading Exchanges in India

Here are the four commodity exchanges in India with detailed information about each of them:

Multi Commodity Exchange of India (MCX):

Founded on 10th November 2003, MCX is an independent commodity exchange based in Mumbai, India. It is the world’s largest commodity trading exchange for gold as well as silver. For natural gas, it ranks as the second largest and for crude oil the third largest.

MCX is a goliath in terms of trading volumes. It reported a quarterly turnover of ₹1.78 billion for the quarter ending in September 2018.

MCX trades in Gold, bullion, non-ferrous metals, and a lot of agricultural commodities.  All over, the commodities traded in MCX are:

  • Energy: Crude Oil, Crude Oil Mini, Brent Crude Oil, Natural Gas
  • Metal: Aluminium, Aluminium Mini, Copper, Copper Mini, Lead, Lead Mini, Nickel, Nickel Mini, Zinc, Zinc Mini, Brass
  • Bullion: Gold, Gold Mini, Gold Guinea, Gold Petal, Gold Petal (New Delhi), Gold Global, Silver, Silver Mini, Silver Micro, Silver 1000
  • Agricultural Commodities: Cardamom, Cotton, Crude Palm Oil, Kapas, Mentha Oil, Castorseed, RBD Palmolien, Black Pepper

The live prices of the commodities traded by MCX can be checked by traders online on various websites.

National Commodity and Derivates Exchange (NCDEX):

National Commodity and Derivates Exchange is an online commodity trading exchange founded on 15 December 2003. The founding members including ICICI Bank, National Stock Exchange of India (NSE), National Bank of Agriculture, as well as other major Indian Financial Institutions. It is based in Mumbai, with offices all around the nation.

In terms of value. NCDEX comes second in India following the MCX. NCDEX’s primary focus is on Indian Agriculture. Out of 27 contracts traded on the platform, 25 are agriculture based.

NCDEX has proven out to be more than a trading platform. Due to agricultural live prices, it has increased market transparency. Farmers now have a better idea about the prices their crops sell for. This has considerably improved Indian Agriculture.

With India being the primary base in spices, heading both consumptions as well as production, NCDEX is a worldwide standard for spices.

The commodities traded include wheat, chana, barley, maize Kharif, maize rabi, kapas, cotton, guar seeds, guar gum, castor seed, soybean etc.

Indian Commodity Exchange Limited (ICEX):

Indian Commodity Exchange Limited is one of the prominent online Commodity Trading Exchanges based in Mumbai. It is regulated by the Securities and Exchange Board of India.

Indian Commodity Exchange offers to trade all through the nation with the help of the brokers it has appointed. Major Indian financial institutions like the Punjab National Bank, IDFC Bank, KRIBHCO etc. are prominent shareholders in ICEX.

ICEX initiated the world’s first contract in Diamond Derivates. It wishes to trade in all commodities that are economically relevant in India.

The commodity trading exchange trades from Monday to Friday. For agricultural commodities, the timings are from 09:00 am to 05:00 pm. For non-agricultural commodities, the closing time is extended to 11:30 pm.

The non-agricultural products which ICEX deals with a are diamonds and steel. The agricultural products include spices like black pepper and cardamom, oils and seeds like castor seeds and soya bean oil, fibres like raw jute, plantation crops of rubber, and others like guar seeds and Isabgul seeds.

In 2017, ICEX merged with National Multi Commodity Exchange, which was the third largest commodity exchange after MCX and NCDEX.

Ace Derivatives and Commodity Exchange (ACE):

Ace Derivatives and Commodity Exchange (ACE) was founded on 26 October 2010. ACE stands for Ahmedabad Commodity Exchange. The exchange is one of the leading commodity trading exchanges in India.

Ace Derivates and Commodity Exchange deals with contracts on soy oil, mustard seeds, soybeans, castor seeds, precious metals such as gold and silver, crude oil, copper, and other agricultural crops.

While Ace Derivatives and Commodity Exchange started as a regional market, it was soon upgraded to a national market. This was the first instance in India where such an event occurred.

Kotak Mahindra owns 51 per cent share in Ace Derivates and Commodity Exchange, calling the platform ‘Kotak Anchored Ace Derivates and Commodity Exchange’. There are other financial institutions who have invested in ACE. These include Haryana State Cooperative Supply & Marketing Federation (HAFED), Bank of Baroda, Union Bank, etc.


Exchange Timings:

Generally, all commodity trading exchanges follow similar timings. The market for all commodities opens up at 10 am. For agricultural commodities, the market closes at 5 pm.

For non-agricultural commodities, the timings extend to 11:30 pm. During daylight savings time, the timings can extend to 11:55 pm as well.


Which Commodity Trading Exchange to Choose?

There is no ‘best commodity exchange’ that can offer you sure shot profits. If you are concerned about which exchange you should choose, you need to weigh in several factors and do in-depth research for each.

Primarily, you need to decide the commodity or commodities you wish to trade in. There might be an exchange that offers that commodity while several others do not. For example, Diamond derivates are not offered by most of the commodity trading exchanges.

Further, a certain type of commodity trading exchanges might be well suited for a particular commodity. Some exchanges might be a benchmark standard for agricultural crops, while others may have a wider recognition for energy resources like crude oil.

Each commodity trading exchange has its pros and cons, therefore make careful decisions before you start trading.

In the end, it is important to realize that the commodity trading exchange is only a medium. It is the trader and his trading strategies that matter. For some of these strategies, read our 5 powerful commodity trading strategies you must use.

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More on Share Market Education:

In case you wish to learn more about Commodity trading or stock market investments in general, here are a few reference links for you:

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